tv Squawk on the Street CNBC March 20, 2012 9:00am-12:00pm EDT
a very special thanks to our guest host, richard lefrak. make sure you join us tomorrow. "squawk on the street" begins right now. >> thanks for coming in. good morning and welcome to "squawk on the street" on this, the first day of spring 2012. certainly fe lly feels like it new york city, at least. carl quintanilla and david faber are both off today. futures moving lower this morning. decline in february housing starts certainly not helping malters. right now looking at a lower open on the dow by about 78 points. as for europe, we're seeing pressure on bankers. in particular miners. we are, in fact, seeing the ripple effects coming out of china this morning. comments from a bhp executive about slowing demand for iron ore is sending miners lower. also vehicle sales forecast sending those shares lower as
well. dollar moving higher, meantime. luxury, demand is still intact. that's what tiffany's said wits rosey outlook. sales in asia up 19%. new york flagship store saw a 20% rise in fiscal fourth quarter. positive sign for brokers coming out of jeffries this morning. marked improvement in trading and investment banking. mark zuckerberg bows out of the company's first analyst meeting choosing his time to develop the service. news on what facebook is pag its underwriters, here's a hint. it's way below the average fee. no surprise. start with the mining stocks under pressure in the premarket trade. this after the president of bhp billiton's iron ore saying flattening oil demand in china. they see it going to single digits. sending ripple effects all around the world.
jim, do you buy this? for every data point we have about china growth slowing we have one that is showing the opposite? >> i've been waiting for an aggressive ease by the chinese central bank. i think things had to get really ugly before they would step up and start doing that cutting. maybe this is the definition of ugly. we understood they were slowing from 12% to 7.5%. my take is there's really nothing new here other than the fact that, hey, shocker, this is what happens when an economy slows. the inputs aren't good. i would warn about alcoa. i would warn about the steels. a lot of people have been saying good thipgs about the steels lately. that seems misplaced to me. >> china, there's two schools of thought, it seems. one is they're slowing down. bad news. vehicle sales demand ratcheted back. iron ore maybe ratcheted back. fuel prices on the rise. home prices falling. another school of thought suggests it's slowing, but it's still slowing to 7% to 8% which we would jump over ourselves to get and that things aren't that
bad. >> we should note there are some questions about the newness of these comments out of bhp this morning. producer on our show actually put in a call to bhp and said that essentially the forecast we were given this morning were the same as before. that in the past they have said they will see china demand growth slow from more than 10% to 7% to 8% on average over the next decade. they also say that they have already said they saw that growth slowing before. so there's this question of whether or not investors are simply latching on to these comments thinking that they may be new because they are scared about this prospect of a hard landing now that jpmorgan has already said, you know what, china is already in a hard landing. there are some doubts out there at this point. >> i question the hard landing pieces only because of tremendous secular growth in china. you do have a wild west out there that has to be built out. it's an actual growth infrastructure. every time you get two bears from china, like brian says, wait a second. if i'm bearish on china the rest of the world is simply awful. >> i'm going to give you an
anecdote. i was in hong kong two weeks ago for a couple days. met this guy, a property developer. he said his capital, this is just again one guy, one company. his capital had dried up for asian development and that his backers, the people that put the money into his real estate funds, wanted their capital to come to the united states and they were looking for opportunities here. so tup side to the u.s. story. again, one guy, one anecdote. i found it interesting. >> it's always we've become conditioned that we are not a growth country. we've had five years without growth. the chinese are really the only driver. there was a time caterpillar -- this morning goldman sachs says maybe caterpillar earth moving equipment is coming back. there was a time we were a driver. it could happen again. let's not get too negative. >> captain america. i like it. there's an upside to the story. >> even if we revisit the forecast and take a look, say you know what? they said this before. fact of the matter is they are
still saying if one believes that these comments are, in fact, old, quote, unquote, old, they're still saying the floor in iron ore will be $120 a metric ton. right now they're $145. that's a huge decrease if we are to believe that demand will slow. so that's still -- the question is, is that price, is that floor price discounted into the stock? you've got to believe by today's price action that it's not so far. maybe there's more belief that that floor price will be reached sooner rather than late zbler speaking to the ceo of cliff's natural, that's the old cleveland cliffs i remember during the tough times in our country when they were doing poorly. they raised their dividend rather dramatically. 63% last week. saying they see a sustained increase in the use of iron ore. this may be one company playing against another. bhp is saying pricing is going to hold up. >> i tell you what, i don't know if we can do it, guys. if they can put up a 10-year chart of cliffs natural when it was cleveland cliffs, this story was ridiculous about five years ago in terms of its assent. i think it's important to say where have we come from?
where are we now? if we get a little bit of a pull back, look at that chart. that trades like pets.net. not a natural resources company. >> the second best performer in the s&p 500 over the last ten years after apple. >> really? wow. >> stupid anecdote. vacation in the upper peninsula of michigan. good people. people have been going back to work up there in iron ore. again, is america a growth nation? maybe not in that. but people are going back to work. >> right. in terms of the ripple effects, immediately off the back of the comments we saw the impact on a pullback in aussie u.s. dollar. we're seeing the dollar strengthen having an impact on the overall commodity trade. we have crude, for instance, down by more than a buck right now. we had some comments out of saudi arabia saying you know what? we'll stand by. we'll make sure prices are good. we're going to send oil right now. saying tankers are on the way. the oil is coming. it takes 40 days to cross the ocean. >> they're going to give away
the gas in saudi arabia. if oil breaks below 80 bucks before the end of the year, melissa, i'll buy you a starbucks. a small starbucks coffee. because when saudi arabia says help is on the way for them, help the $80 to $85 a barrel which is not helping us. >> $80 to $85 a barrel is helping. we're at -- >> 50 bucks -- agreed. >> will we ever go back to 50 bucks? that's a whole other conversation. >> 25% of our oil is imported to make diesel for trucks. >> eight of the last eight presidents have said we will reduce our demand or foreign oil. started with nixon. every speech. ford, carter, reagan. guess what? our demand now, we import about 60% of our oil versus 24% when nixon said it. >> 65% this year because of new fines. obviously romney in a very critical piece in "the new york times" today noneditorial saying romney believes that obama
doesn't favor -- >> if you're krans canada, just build a pipeline to vancouver and tank it over the china because you can't get it built to houston or galveston. >> if that's the case disagree with wells fargo downgrade today on front line. i talked to nordic american tanker. rates up to 30,000 to 35,000. the day rates up from 10,000. >> that's still cheap. jim cramer can rent a super tanker for a couple of days. we can all go for a cruise. those rates are still not profitable for a tanker company. >> i tried to do that. the problem is the air freshener issue. >> i don't even want to know what that is. >> mparty max. >> you can only hang so many of those things you put in your car. >> it's still not a good tanker day rate. it's firming. >> we were 100,000. >> yeah. there's still tankers sitting off the coast of iran, saudi arabia, sitting there empty. >> maybe you think the front line is too high. >> they downgraded it.
>> yes, they did. let's talk tiffany shares. they are moving higher in the premarket today. luxury retailer issuing up beat earnings guidance for the full year adding it sees double digit sales growth for the period that forecasts overshadowing the weaker than expected fourth quarter earnings here. i don't know, jim, how you interpreted the results. when i was poring through the press release costs including non -- inventories were up because sales were a little bit weaker. yes, they have pretty strong sales. they're looking out to stronger sales. but they're saying essentially, you know, believe us. we're going to deliver. i don't like that. >> no. i was surprised talking about 10% to 13% growth. as soon as you hear double digit people get very excited. they're citing asia and the americas. it's interesting. in the previous quarter we were so worried about wall street bonuses. guess what? wall street bonuses were not that good. i believe that perhaps once again they are overpromising. i fear underdelivering. they are getting people to buy the stock on a day where it looks like a dicy day.
maybe people should be letting that stock go up here rather than taking it up prematurely. >> yeah. >> how do you factor in -- >> i know michael kors -- i don't want to jump the gun but the numbers were extremely good, same store sales. >> a 40% grower. rather amazing. >> 39% year over year comp store sales growth? that is unbelievable! >> it is the greatest growth story right now of our era. >> the bear case of michael kors in terms of valuation is in terms of opening too many stores and oversaturating the market. when you see 39% seam store sales growth you've got to think there's room to open some stores and it won't really dent the sales there. >> in fact, kors was saying in the press release they noted they're having problems getting orders out on time zblin credible. >> they built a new distribution facility to handle all the volume and they're having some issues getting all the orders out on time. i know that's a bad thing if you're a michael kors customer. melis melissa, you order something fancy, you want it right now, you've got to wait a couple days.
that's not a bad problem to have. >> a high quality problem. mickey drex ler taught us, yes, it's absolutely true. you do want to have the correct amount of inventory. you sure rather would have less inventory versus demand. >> they need some kiba robots working the factories. >> lulu lemon a cautionary note. they report later this week. jefferies paving the way for what they think is going to be disappointing guidance, too much inventory. that happened last time with lulu. then they understand promised and blew away the number. i vastly prefer that than what i see happening at tiffany's. >> the question back to michael kors, the big stock rise in premarket trade today is with the share issuance. why are people simply looking through that? right now with valuations so high, we're taking a look -- 68 on michael kors. near an all time high. ipo'd back in december. 20 bucks a share. approaching 50 bucks a share which was the all-time high in the stock. >> grave mispricing of the
underwriting. i would also point out they undid the lockup which is highly unusual. >> they waived it. >> giving a chance for insiders to be able to take advantage of what may be the classic moment in kors to let the stock go. i don't know. i do like great growth. i do like under armour. i do like nike which reports laker this week. i don't want to be in there paying up when they're selling. >> i saw when they waived maybe that was ringing the bell on the stock. the bankers are saying this is as good as -- >> there's a note. herb greenburg, pretty smart guy, hate to say that. it's going to come back to bite me later on. he mentioned yesterday on street signs that dunkin brands private equity initial investors were also selling earlier than maybe some had thought they should. now melissa you bring up michael kors. insiders being freed up. dunkin brands. maybe some of the insiders being freed up. some of the insiders who
presumably have more information than us dumping out of the stocks. >> granted, they own a whole lot more stock than that. but, still, with the 4% rise in the stock, it approaching all-time highs, this kind of forward pe, what would you pay for ralph lauren or, you know, any of these others? >> there's some cotton harvest numbers that came out this morning that shows record cotton harvests all the way from india to brazil. make me want to pay more for ralph lauren which has got the asia story still not in it. kors the envy. get on the desk with the power people they'll tell you kors has the model. kors has a runway. let's hope they price that deal well in the hole. i wish the stock was looking 45, now it's looking 47. let's not forget, when you see individual stocks like tiffany or kors perking their heads up in what's going to be a down day, it's a sucker's trade to come in and pay up on a down day. >> is there a difference between buying a high valuation, chipotle and michael kors.
one makes delicious tacos and burritos. >> one makes beautiful handbags and belts. >> yes, they do. flavors for bags and belts and shirts, don't they change faster? aren't you one spring show away? hasn't the gap taught us that lesson? jeggings did not save the gap. >> vera bradley had a very -- well, a weak number. our colleague, herb greenberg, pointing that out. he's probably so happy today. remember, ralph lauren, vf corp., these are juggernauts. >> let's talk jefferies here. this certainly could have ramifications on the financial sector over all. reporting better than expected fiscal quarter results. the firm says it earned 33% in the first quarter. four cents above street forecast. of course, jefferies has always been looked at as a barometer for the rest of the industry. they report. all the rest follow.
can we make the extrapolation? we've seen a lot of analyst estimates go higher across -- just yesterday morgan stanley raising estimates on a slew of bank stocks here. >> i like the financials. jefferies, i was looking for the stock to sell off no matter what number they -- they put up. that obviously at least for the moment is not -- this stock is hanging in there. let's say that. i don't regard jefferies as a bea bellwether. they're a remarkable trading firm. great fixed income work. richard handler, the ceo, has been just so impressive. to extrapolate on a day where i expect the financials to get hit at least at the opening reminds me that there are other better values. this stock has more than doubled in the last few months. >> but it more than doubled, too, off that -- remember last year there was all those rumors about jefferies. i was on the phone with them all the time. everybody was. i'm sure you guys were, too. all the blogs bashing jefferies. stock took a huge tank. it has doubled off the low. >> shawn egan bottom. because he downgraded the credit
rating. then all of the sudden -- >> they were holding special conference calls. >> a lot of fears perhaps unwarranted now. >> a sore subject for many people, mf global. i know a lot of people lost money. the stories i read continue to vindicate on a criminal basis jon kcorzine. it would not shock me if there were civil ramifications. i think as this thing unwinds corzine will not face any sort of prosecution. >> we've got to touch on bank of america. i know it was yesterday's story. a remarkable turnaround in the middle of the session on the rumors. bank of america came out towards the end of the session maybe after the bell saying that the rumors were not true. these were rumors of a secondary share offering. then the stock started bouncing back. this morning it does look like they will open slightly higher but still off $10. yesterday we were talking about more than $10. which is a threshold that jefferies crossed which was double the december 19th bottom. at was your take on that? there are some theories it was short selling. but it was very strong volume on
the stock which would make me think it's harder to push around, to just float that rumor. >> i think there were people doing a rear guard action to bring down that group. i felt that that was a rumor. remember, the 1934 act specifically forbids fomenting trading. i would love to have the tapes of what happened there. i think someone who had been overrun on a short really made some comments that were unverified. it did kill the bank rally in its tracks. of course, we've got some negative commentary this morning. bernstein downgrading regionals saying they've moved too far. maybe the banks take a pause. morgan stanley yesterday over 20. seemed like an interesting very big move. maybe they cool. maybe they cool. >> all right. >> thank you. well, coming up, is this the end of adoeby systems run up? quarterly revenues disappointing the street. we are going to speak live with adobe's cfo. another look at the futures. we are still down, folks, on
this bhp comments. but, hey, maybe we'll come back. got some positive comments from caterpillar coming out right now. >> you see that? >> just now, jim. global sales up 21% by the end of february. there you go. we are still down, though, "squawk on the street" returns right after this. with a new view of the market, you could see an investment opportunity you didn't see before. fidelity's next generation ipad app lets you see what's trending around the world, as well as what over a million fidelity customers are trading throughout the day. and advanced charting lets you customize your views and set up your own comparisons. our ipad app can help refine your strategy or even find a new one. i'm velia carboni, and i helped create fidelity's next generation ipad app. it's one more innovative reason serious investors are choosing fidelity. get 200 free trades and explore your next investing idea. ♪ when your chain of supply goes from here to shanghai, that's logistics. ♪ ♪ chips from here, boards from there track it all through the air, that's logistics. ♪ ♪ clearing customs like that hurry up no time flat
welcome back sto "squawk on the street." we're watching shares of caterpillar just coming out and saying that global sales, meaning three months ending in february, were up 21% driven by north america. there they saw sales grow by 39%. this is three months ending in february. can we actually use that as a data point saying that maybe china's not slowing. we're seeing most of the growth happen here in north america. >> we have to remember in a caterpillar conference call they were talking about how we were still only at about the 50% to 60% of the activity that we used to have in this country. this looks like the beginning of the construction, earth moving renaissance in this country. i think it's the kind of thing when you see apartment construction, commercial real estate, it looks like that they're finally going to see some cranes. when you go to different cities, you never see cranes anymore. i think that this is a very bullish call but, remember -- >> do you buy joy global?
manit manitola? >> my problem with joy, the numbers could be high. every time you jump in they whack the numbers. you end up getting your head handed to you. as we were discussing, the great growth story of the era, you've got to have china. ralph lauren, got to have china. coach, china. starbucks, china. i like earth moving equipment in america. i do want china for -- >> quick question, is michael kors stealing market share away from ralph lauren? or is it organic? we'll see. coming up next, putting a spring in your step and your portfolio. get ready for cramer's mad dash. looks like a lower open across the board. stay tuned. choose control. introducing gold choice.
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♪ just about five minutes till the opening bell rings here on wall street time. cramer's mad dash, disney could see a hit. $200 million loss because of a movie most people did not see, apparently. "john carter." >> one of those stories we wonder what's going on at disney. company tried hard to minimize possible losses for movies. flies right in the face of the strategy. that said obviously there are many growth drivers. espn, theme parks. very big. very disappointing. on twitter this is all people wanted to talk about.
i understand that. i don't want to sell the stock because of it. i get what people are worried about. >> let's talk about lion's gate. set to open at another 52-week high. this stock has been on fire. take a look at this run. we're sitting here close to a 52-week high. >> you have a vice chairman of lion's -- >> we have a vice charm of lion's gate michael byrnes on tonight. tickets have been in presale. you're noting how difficult it is to get one. >> i happen to be a huge fan of the series. >> "the hunger games." >> jpmorgan. jpmorgan really pushing the stock. i question, you must get north of $100 million for this. which means multiple viewings. people have to come back and watch it again in order to fulfill the mission of taking lion's gate further. they do have some good tv products coming up. that's mentioned. >> "mad men." >> lost its luster given the fact it's been off for a while. >> that's true. or maybe pent up demand. this will not be a "john carter" open because many people
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there you have it. the opening bells here on wall street. pacific drilling celebrating recent ipo. at the nasdaq exact sciences corporation. molecular diagnostics company. it is a sea of red as you see at the cnbc realtime exchange. of note, jefferies opening higher. higher news by bank of america, up by .6%. in terms of other things we are watching, we haven't mentioned apple the whole show. >> no, we haven't. a series of price increases. again, i think what's happened is people should understand at home when you have a price increase after price increase, what that tends to be is that your target was too law. it does give you another reason
to squawk. a couple people, piper coming out to say ipad could be 66 million units up from 60 million units. citigroup price target goes from $600 to $700. credit suisse from $600 to 700 tl. an inexpensive stock. also a stock that has run so much that people are obviously getting nosebleeds even if they maybe shouldn't. >> in terms of an apple-related play, ovti which makes little cameras. is that correct? >> yes. >> the cameras in the ipads. needham out with comments. >> it's interesting to be able to still do a teardown play. ovti has historically been a not great executer. arm holdings also upgraded. arm holdings still one more play about what's in the ipad. my problem with this, this was last week's trade. i don't want to go back to it and say, oh, geez, this was a
shocker. people at home, these things were done thursday and friday. it's nothing rev la toir. >> right. we are seeing the trade on michael kors continue. we do see it open officially up by 2% or so. you know, we talked a lot about the apple dividend yesterday. but dpz, a special dividend being paid there potentially. >> merrill lynch, this is something that kind of does bother me. merrill lynch, they said seldom kn -- sell domino's pizza. they say special dividend and the future won't be as good as the past. here's what you need to know. this firm had a hold on the stock the whole way up. now they go to sell. i question their judgment since they missed the the whole move. i think it's questionable. >> right. we're also watching caterpillar. again, the company coming out this morning saying global sales for the first three months ending in february up 21% in north america, 39% in case you missed the news. caterpillar shares are down by about 1.8%. >> here we go again.
china trumps united states. is that really the way to do it? i think that globally, people want to see china go from 7% back to 10%. there's a lot of disbelief that our country can generate good numbers again. i'm back in our country and thinking that caterpillar, while the stock is up a great deal, should not be thrown out here. although it's obviously a down day so far. >> we've got to watch the automakers as well. a state report saying that china vehicle sales growth would only be, what, maybe 5%? that's down from forecasts prior that were as much as 8%. that would be a sharp slowdown. in europe we certainly got the cues there. bmw, daimler, voeks wagon, all down. here in the united states gm down. big china sales there. ford down also by about 1.8%. >> ford not as levered because they've got partnerships there. gm, a lot of the upside with gm was supposed to come from china. it's been a closet china play. not unlike joy. not unlike caterpillar. i am a little bit surprised
about that dramatic slowdown. because gm, maybe the numbers, melissa, are too high once again. >> yeah. bank of america is up by 1.5%. we're at 9.67. certainly not at the highs that we saw in yesterday's session which was about 10.08 i believe. when the stock fell, a lot of people were saying it doesn't need to raise capital. there is not that need there. at the same time, people were willing to just take the money and just run. where there's smoke, there's fire, was the thinking on the trading floors yesterday. >> when i see the regional banks starting to move and the national banks starting to move i always want to call out that if we had any sort of upward momentum in revenue growth and then that interest margin going up, remember the 10-year has been on the move here, those stocks will be worth owning. jefferies is holding in very well. jefferies making some comments about the liquidity of the book. again, that answers some of the charges of how much money they're really making and
whether they're got a clean, tangible book. i don't want to sell that group, melissa. i think that group is still too cheap. i know everyone's turning on it. when these things start rolling they tend to surprise to the upside. >> brian here on the floor with bob pisani. >> thank you very much. we're going to talk more about bhp comments and whether or not they are being overinterpreted, if you will. first, bob, i know you and i were just chatting. you are saying we've got to watch mario -- the ben bernanke of europe, mario monote. >> reform of europe is resting on mario monti's shoulders. we all should be hoping he succeeds. nobody paying a lot of attention to what's going on monti is in critical discussions with labor union leaders today over reforming italian labor law. those who don't know it, it's almost impossible to fire anybody in italy. they've got this article 18 of
the labor law that says you can't fire anybody without just cause. sounds reasonable. turns out just cause does not include economic reasons. it's even difficult to fire people for disciplinary reasons. monti wants to try to change this. this is really critical. they tried doing this ten years ago. ten years ago. then prime minister berlusconi was around. it caused such a -- an italian -- was assassinated in his home. it caused such an international outrage that berlusconi backed off and italy lost ten years of potential reforms that they could have gotten through at the time. >> to liberate the economy, free up the economy, restimulate gdp growth. why should we believe this is going to happen now when ten years ago not only did it not happen, as you pointed out, it got violent. >> it got violent. because it's a lot more critical now. and because we've got a guy -- >> people understand that. >> i think all three of the major parties are supporting these changes. but the devil's in the details.
how do you actually rewrite the law? you've got to rewrite in a way that makes meaningful change. that's what you've got to watch. he's in discussions now. the labor minister has been into discussions with the labor unions. now monti is stepping in today to go himself personally to talk to the labor unions and see what kind of agreement can be made. let's just all hope that monti prevails. because this is the cutting edge of reform in europe. if he can't pull it off right now, then we're going to be in trouble. the reform movement is in trouble. >> we did the seven-hour trip from new york to rome. whatever. eight hours. continue another ten. beijing. shanghai. bhp and australia. talking about china, a possible slowdown. >> i'm puzzled by this remark. we had a bhp executive talking about iron ore demand is going to drop into single digits. let me just point out that what iron ore demand did in china. iron ore demand went up an average 24% a year from 2000 to 2010. this is very well studied. think about this.
24% a year for ten years. do you know what that does to the law aritmatically? at some point if you keep going up you'll consume all the iron ore in the world. you can't keep doing that. the law of large numbers comes into play. the last couple years the amount of imports has been slowing down. in 2011 the average was 11% compared to 2010. this year they're saying it's going to go into the single digits. this not terribly surprising. >> is it even new? >> there's a law of large numbers that has come into effect here. >> one of our producers here got ahold of bhp. their pr person told us this is not new information. that they have guided this way before. and the market was misinterpreting the ceo's comments. >> my point is this. even in single digits, compared to ten years ago single digit increase this year compared to numbers now is a heck of a lot different from a few years ago. >> auto sales going from 8% growth to 5% growth. >> bhp said they're going full steam ahead with their iron ore
expansion. they're not cutting back expansion of their iron ore. they're expanding their iron ore facility. i want to make one comment on caterpillar. late headlines. global sales up 20% for the three months ending february. i don't know if you know this or not. but i don't know if that includes the bucyrus acquisition. this is a headline from that. i'd like to know if we're really talking about apples to apples here. >> great point. >> caterpillar's revenues went through the roof in the last few years. they had an absolutely unbelievable two or three years. from 2010 to 2011 their revenues grew 40%. 40%. so bear that in mind when you see numbers that say -- it sounds really good. keep it into context. >> bob, i do think that those numbers do include it. there's also some chatter here just so you know about dealer sales show strong but slowing
growth. obviously when you have a strong stock like caterpillar, anything that is deviating from the notion that earnings per share have to go higher, goldman sachs said they expect estimates -- earnings to be 10% higher than estimates. you're going to have a little bit of a touche you lent situation. >> i think it's november they were growing at a 34% annualized rate. 21% a good number but would imply a slowdown from three months ago. >> that's my point. their revenues were $42 billion in 2010. $60 billion in 2011. 40%. that's a really amazing number. >> really incredible. the confluence. oil down. copper down. suddenly it's quite a reversion from where we were just, let's say, three days ago. but, bob and brian, thank you. let's shift over to bonds and the dollar. the bond market has been just a tremendous source of incredible volatility. rock santelli at the cme in chicago. go ahead, rick.
>> you have to continue as jim said to monitor the fixed income markets and some of the 10-year benchmarks. look at our 10-year note yield. yes. once again in the mid 230s. probably move a little higher as you can see on this chart. going back to the beginning of october of last year we're still hovering in the zone. the highest yield closes since the end of october. if you move towards the bund in eurozone see that while we're approaching a 2.40 they're barely holding over 2%. yet the pattern is very interesting. the yields going back to early december on a closing basis in terms of the last time we've seen these. and last but not least, very similar to our pattern, uk 10-year gilds hovering in the mid to lower 2.40s. what a bounce in yield selloff they've had. that also kochs with the u.s. highest yield closing zones back to the end of october. dollar index. we've all seen that it definitely had a rebound. and so it should with rising raising one would suspect. but we are now below 80. as you can clearly see, that's about the level we finished off
the end of 2011. jim cramer, back to you. >> thank you very much, rick. let's check out the latest moves in energy metals. everything seems to be a tad weaker. sharon epperson's at the nymex. go ahead, sharon. >> jim, you know, it's not only bph billiton traders are focused on. they're focused on comments from rio tinto talking about slower growth coming out of china. add to that we're looking at some of the auto manufacturers' reports about what vehicle sales will be like. much below what the plan was for 2012. of course, we also have the fact that the chinese are now paying about 40% more for gasoline at the pump than they did in july of '08. that's a far cry from what we can say here even though we're still groaning about the high fwas prices we have. what will this do to chinese demand, to the economy? that's a major concern weighing on oil prices as well. the saudis have said china a big customer of the saudis. now they're saying they're going to do something to make oil prices fair. that has also helped to put pressure on oil today. we are looking at prices that are near the lows of the session
right now. brent down about $2. of course, wti down more than a dollar. focus on the may contract. because that is the one that is most active. melissa, back to you. >> thank you very much, sharon epperson. we are seeing the china ripple effect really play out here. sale stocks trade sharply lower. this is one of the leaders on the s&p 500 in yesterday's session. coal stocks also down sharply. all of this, jim, of course is intertwined if you take a look at the csx and unp moves we're seeing in today's session sharply lower as well. >> these stocks tid have a bit of a run last week. there was a recovery in norfolk southern. cfx told you not to worry about the natural gas switching trade. nucorp yesterday upgraded. peabody, substantial holdings in asia. that stock crushed today. down almost 2 bucks on a 31 basis. this is a day we are back
totally in correction mode today. it'll be interesting to see what happens in a 2012 situation where suddenly people say maybe i need to take some profits. >> is there an upside to the downside if things do slow down a bit? shouldn't the price of oil and, of course, the saudis are assuring us they're just going to flood america with oil. crude oil, the latest contract at $106.85. if we can get oil back down a little bit shouldn't that give a little boost to consumer spending? we always hear the opposite. higher oil and gas prices kill the consumer. if a slowdown comes and oil drops, won't that then help the consumer? >> i think it will help president obama. i can tell you that. >> we need to come down a lot from that level right there, right? >> yes. you're absolutely right. >> we're also watching the fertilizer space. agram made a bid for vitera. glen forest stepped in. the bid has been accepted. we're seeing shares of agrium move higher on the back of its failed effort to buy vitera.
piper saying they like cia. they're saying hold on agrium. >> i've always favored potash. secondly mosaic. this was the group that led us in 2000lele. there were i think led us off a cliff. i never mind when this group goes down. >> couple things to watch given that years and years ago in a life far, far away i actually used to trade fertilizer. some say i -- >> like the stock's miracle grow kind or potash kind. >> some say i still trade fertilizer in a different way. >> different kind. >> watch shipping rates. i know they load up on try bulk carriers. watch the baltic dry index. that drops, ship rates come down. that's profitable. a long time ago, we used to make money on the trade on the actual if you delivered the physical contract. so watch the bdi, baltic dry index. also fuel prices. these plants are basically
refineries that make phosphates. go down to plant city, florida. i've been there many times. see these giant phosphate plants. they consume a lot of energy. lower prices could help their bottom line. >> i thought you were talking about miracle grow. like at a home depot or something. >> oh, no. >> remember, the spring planting season is upon us. let's not forget, weather, it's a big upside. >> spring planting season? i thought we talked about the spring wedding season in india. >> watch out. they're really restricting gold. we've got to take a break here, guys. let's hit our squawk on the tweet question. ben bernanke putting on his teaching cap lecturing students at george washington university. we ask you, how would you impress professor bernanke if you were in his class? we were thinking would you ask smart questions? sit in the front row? grow a beard? bring an -- the possibilities are endless. send us yours. we've got your answers coming up.
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get your motor running. here are some of the stories we are squawking about. 20 minutes into the trading day. tiffany biggest gainer np s&p 500 up 6% on the retailer's up beat four-year outlook. >> people really buying that upside. a lot of shorts in that name, too. >> the international air transport association cutting its full-year airline industry profit forecast from $3.5 billion to $3 billion. the group citing -- i was going to say, the fact that they're forecasting a profit for the airlines is news enough! >> there you go. >> forget they're cutting $500 million. the fact that airlines might actually make some money? there's your headline. the fwrgroup citing a sharp jumn
oil prices for the downgrade. it appears apple's new ipad is heating up literally. reports say customers who bought the new ipad, ipad 3, whatever you want to call it are complaining that it is becoming too hot to hold after about 30 minutes. i saw something through one of the blogs this morning. tweakers.net. some german site. they did a heat scan. yes, it actually runs hotter than the ipad 2. >> they actually identified or pinpointed where the heat was emanating from. they said the lower left hand quadrant. when the ipad is held up right in portrait mode. so when it's held upright, it gets too hot. >> is that a graphics processor? if i was going to build a tablet that's where i would put the graphics professor. >> intel had -- do you like at yourself in your ipad? what a handsome man. >> it's actually off. you use the reflection. that new retina display is fantastic for fixing your hair. i'm kidding. listen, it's a big story. you sold 3 million over the
weekend. if some people say, you know what, apple, it's too hot to handle, please take it back, apple's got to say fix this, that's a big hit. >> i want to know how high the temperatures get beyond 30 minutes. maybe it gets to burning level. we don't know. >> hot high precision. >> anyway, let's get to the break. because we've got to hit the break. trading day is young. lots more "squawk on the street" straight ahead. ♪ it's time for me to introduce six penguins in my shirt ♪ >> you may have six penguins in your shirt. but cramer has six stocks on his mind. six stocks in 60 seconds when "squawk on the street" returns. ♪ when your chain of supply goes from here to shanghai, that's logistics. ♪ ♪ chips from here, boards from there track it all through the air, that's logistics. ♪
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seems like a very fine time to check in with simon hobbs about what's coming up on the next hour of "squawk on the street." >> with the market down the worst fall we've had in two weeks, byron wien, veteran strategist on how you play the market. tiffany's. we're also going to talk about the comeback kid, namely
jefferies up now over 40% year to date. back to you guys. >> all right, simon. thank you very much. it is time now for six in 60. which i'm still getting used to. be gentle. i haven't had enough starbucks. ubs says in people have. >> it's overrun the price target. they raised the target again. i think the stock should cool. there's a big meeting wednesday. >> not too bullish on the evolution juice bars as a growth driver? >> it could be a good play. >> arm holdings, bar icalclays g comments. >> the trade is made. it's a laggard. stays a laggard. >> nike? >> they report this week. we're getting bullish comments ahead. do they know something? i tend to think they don't. be careful. i don't like a stock that runs ahead of a quarter. >> jefferies raised their price target. >> futures order control, not the earnings. >> interesting on transoceans. a headline stock with the bps, also the chevron stuff. >> this is the teflon drilling
company. because whether it be macondo, latin america, people still love it. huge secondary. >> cowen likes accentra. >> you get ahead of these reports in a sloppy take it doesn't make you money. >> we didn't get to williams. >> an acquisition where the stock is going higher. i like that situation. >> we actually just got to williams. what's on "mad money" tonight? >> i have cliffs. cliffs natural. we've got to find out for heaven's sake whether things are as bad as china indicates. and western resources. similar to what we saw with williams. ask them whether that business is going to continue to be as strong as it is. >> six in 60. "mad money" tonight. good insight into bhp comments. tiffany's underperforming the s&p 500 this year. but they posted very solid numbers. the stock is up today. we're going to get much more on that coming up. more "squawk on the street" straight ahead.
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oil sands projects, like kearl, and the keystone pipeline will provide secure and reliable energy to the united states. over the coming years, projects like these could create more than half a million jobs in the us alone. from the canadian border, through the mid west, to the gulf coast. benefiting hundreds of thousands of families throughout the country. this is just what our economy needs right now. welcome back to "squawk on the street." the road map for the next hour. markets taking a breather this morning after housing construction data slipped here in the u.s. worries other china's growth weigh on investor sentiment.
have they interrupted the bull run for good? we'll talk to byron wien. luxury retailer tiffany reporting fourth quarter earnings slide 1.6%. reporting demand for pricey pieces remain intact, though. we'll break down the high end trade in just a few. saudi arabia trying to do its part in keeping oil prices in check hiring 11 large tankers to send to u.s. base refiners this month. what does this mean for the oil trade as gas prices hit a new record average just yesterday? top ranked analyst paul sanki of deutsche bank will give us his take. pacific crest yesterday saying growth in profitability remain cloudy. why can't amazon connect with consumers? brian pulley of c net.com will break it all down for us. >> the stories this tuesday morning, disney announcing it will now take a $200 million writedown related it tos super flop movie "john carter." analysts originally expected a
writedown between 120 and $160 million. "john carter" cost the studio $250 million to make. >> wow. wendy's dethroning burger king as the country's second biggest hamburger chain. wendy's set sales of $8.5 billion in 2011 compared for $8.4 billion at burger king. mcdonald's a total of $32.4 billion in sales. a lot of burgers. >> china in focus today after the government raised oil prices and mining giant bhp billiton ceo said iron ore demand from the country looked to be flattening out. we heard from bhp directly this morning. the team spoke to them. they're noting their base case steel forecast for china for 2025 remains unchanged. still these chinese growth concerns are weighing certainly on the european miners and the bank stocks that we saw coming into the session. it's rea really good indicator you can look at futures to see
where wall street is going to open here. you have real clear indicators from the global mining stocks, or automakers. maybe we should do that more on the program. >> in terms of the automakers, that's based on a china state report saying vehicle growth -- sales of vehicles will be less than forecast. it originally was 8%. they're saying as much as 5%. still strong but not as strong as many had expected. that's when we saw the pullback in some of these foreign automakers. we're seeing that play out here in the united states. we're seeing the baton passed as you mentioned from europe in terms of miners and automakers to here in the united states. we're seeing miners, automakers, a lot of the economic growth barometer stocks like caterpillar, like the rails, like coal all down. >> can i just make the point, though, on those european automotive makers, they have done fe no, ma'amly well. >> absolutely. >> this isn't crisis and panic. this is booking profits on what's been a very strong rally for many people. >> absolutely. all right. well, the market's taking a turn for the worse this morning amid a risk averse trading
environment. china remains in focus. commodity prices slip. the dollar heads higher. on the phone is wall street veteran byron wien. it's a pleasure to speak with you. i first want to address these concerns about china. where do you stand on china? because the markets certainly want to believe, at least today, that there is cause for doubt. >> well, i think that the skeptics on china have been around for a long time. but i think what they're missing is that china has been an economy that's been focused on export oriented industries and on infrastructure. and now they're going to emphasize the consumer. so i think they will come off the pace that they've been the last few years, which is close to 10%. maybe they'll only grow 7% or 8%. they'll still grow much faster than almost any developing economy. and much faster than the developed economies. >> if i extrapolate your
comments into a trade, byron, it would seem you might not necessarily be in favor of mining stocks that feed into china but more the companies that feed off of domestic consumer growth within the country? >> right. i would be focused more on chinese consumer stocks. i think that's where the opportunity is. >> byron, where does the market go from here do you think? >> the u.s. market? >> in the u.s., yes. the u.s. equity market. >> you know, my original forecast, simon, at the beginning of the year was that the s&p 500 would get to 1400. that was one of the high if not the highest estimate on the street. >> we're trading at it as you speak, sir. >> yeah. so there we are at 1400. it isn't even the end of march yet. i definitely think the market can sell at 15 times $100 or 1500. so i still think we have higher highs ahead. >> what about the bond market after so many false starts?
do you think it's crunch time now? after the sharp selloff we had last week, do you think there's a bubble there that's about to burst? are people at risk in the bond market? >> well, you know, i've been a bear on u.s. government securities for a long time. so i'm very flattered that you still ask me that question. i think that the right low, if there is such a thing, for the 10-year u.s. treasury, is the equivalent of the nominal growth rate for the u.s. so that would be, say, 2% growth and 2.5% inflation. or 4.5%. we're a long way from there. but i think the 10-year treasury can reach 3% sometime this year. >> what will the fed attempt to do about that? can they suppress that? >> the fed can't do anything. the fed can only really affect short-term rates. i don't think the fed can have a major influence on long-term rates. the reason that -- that rates are so low is there's so much
fear around the world. and the fear has driven investors everywhere into u.s. treasury. as people get a greater appetite for risk assets, the yield on treasuries will rise. >> byron, i want to ask you about the energy markets and the impact on stocks. do you see oil prices and gas prices where they stand right now as being a headwind for the u.s. stock market? >> well, you know, it's a little different this time. as oil prices have risen, it hasn't had the impact on consumer spend iing it has had the past. i actually think that there's an iran premium in the price of oil right now. and if the iran situation, the nuclear weapons fear, declines, i think the price of oil could go down. i'm actually forecasting a decline in the price of oil this year. >> you don't see the tensions suddenly fizzling out, do you? i mean, that's not the nature, that's not the game that either of the three sides are playing.
or certainly israeli and iran are playing in advance of the u.s. presidential election. >> i don't think it'll disappear. but i think it will be less intense than it is right now. >> within the energy complex, byron, since you do think oil prices, at least, falling and potentially gasoline prices as well, where do you see any opportunity in the emergency markets if at all? are there? >> oh, yeah. there are terrific opportunities in energy. because i think hydraulic fr fracking is a game changer. >> byron, it was a pleasure speaking with you. thanks for your time. byron wien. >> brian sullivan is still with us here. he's been here the last hour onset for "squawk on the street." with a look now at where we are
with veterans in the united states. >> a bit of a special segment we're doing. then i'll get out of your hair, guys. here's the story. just getting the number from the bureau of labor statistics about unemployment and employment among u.s. veterans both having served in the gulf wars, korean war, world war ii, et cetera. end of 2011 annualized number of 8.3%. statistically about in line with the rest of the u.s. population as well. here's the problem, though, guys. the young -- what they call the young veterans, those who served post september 2001, the gulf war veterans, the young ones at that, 18 to 24, young male veterans age 18 to 24 had an unemployment rate of 29.1% at the end of 2011. that is 12% worse than the overall population. so the point, guys, is this. is that young, particularly male veterans, i think it's a national disgrace, coming out are not able to get jobs. in fact, about 1 in 3 is
unemployed or was at the end of 2011. and this is why all next week the nbc family, cnbc, nbc proper, we're going to be doing a big special next week called "hiring our heroes." in fact, wednesday, march 28th, this is very cool for me, i'm going to be broadcasting all day from the deck of the aircraft carrier "uss intrepid." we're going to be talking to vetera vetera veterans who are looking for jobs, gotten jobs. it means a lot to me and my family. my dad was a nine-year navy invested man from 1960 to 1969 he went to college after getting out of the navy as part of the gi bill. it's close to my family as well. it's going to be a big, big thing next week. >> brian, thank you very much for that. we look forward to "hiring our heroes" on nbc next week. next, luxury retailer tiffany's reporting fourth quarter profit fell short of
stocks to watch about 45 minutes into trading. comerica downgraded from market perform to out perform at bernstein because of valuation. cf industries overweight at piper jaffray. diamond offshore upgraded to a neutral from underperform. big news for tiffany this morning. the high end jeweler is now forecasting actually quite an aggressive sales strategy across america. let's check in with courtney reagan for more details on that. courtney, good morning. >> reporter: good morning to you, simon. a mixed picture for ultra retailer tiffany when you talk about the earnings following u.s. sales and europe. end of the quarter saw softer than expected sales resulting in an earnings miss for the first time in the last six quarters. wall street bonuses weren't good this year. tiffany sales felt it. executives on the conference call noted restrained spending by customers in the financial sector did affect sales in the northeast and mid-atlantic. tiffany turning in fourth quarter earnings of $1.39 per share. three cents short of
expectations. the retailer famous for that little blue box did forecast fiscal 2012 earnings of $3.95 to $4.05 a share above current consensus. we'll have to see what exactly happens. the company expecting revenue to grow by 10%. shares are leading the s&p sector. as you can see right now up almost 7.5%. elsewhere in high-end retail michael kors ups guidance for fiscal fourth quarter as strong demand for luxury goods continues to propel sales higher. same-store sales up a staggering 36%. but a shift in distribution facilities delaying the delivery of merchandise to stores could prevent the company from meeting sales forecast at least right now. kors' shares have gained 127% from the december 15th $20 offer price. we've only been trading for three months. in a rare move, kors underwriting banks morgan
stanley, jp and morgan are waiving lockup restrictions. as the result, kors is going to sell 25 million shares for about $1 billion in the secondary stock offering. simon? >> $1 billion of stocks being offloaded. thank you very much for that, courtney. back to tiffany and just check in with a retail analyst at collin stewart. we should -- we should acknowledge that actually tiffany's had a bad holiday season. and you, as soon as you saw that coming in january, downgraded the stock. and it's from that position that we're now making gains effectively. >> we downgraded our estimate. we left our rating at neutral because the sales are so volatile. it was the first guide down since january 2009 which, as you'll recall, was a pretty panicked period. >> yeah. >> so it was a scary number. today they're saying that sales have accelerated since then. they expect sales to accelerate on the back half of this wreyea. we're still at a neutral on this stock.
i think sales trends can be volatile. too soon to make a call for us on 2012. >> your analysis is that in the projections that they're making, they are reflecting very aggressive expectations in the americas given the deceleration that they've witnessed. >> the company will need to see, we think, at least 10% growth in the americas to hit their numbers. when you put that in perspective, 2011 sales growth for tiffany which was very strong was mostly on pricing. so either they have to continue raising prices, which i would view as unlikely, or they need to see transactions ramp, particularly in the back half of the year where we have no visibility. the weakness in the fourth quarter was largely attributed to u.s. customers. foreign visitors kept buying. i'm not sure you can count on that in 2012. >> so prices have a sort of ceiling. you don't see price hikes any time soon. we're going to depend on a ramp in sales in the back half of the year. and we're also seeing -- they're spending in order to market is
also going up at the same time. why do you think the stock is higher? is what we're seeing in today's session, laura, a short squeeze? is this a favorite among shorts on the street as far as you know? >> i don't think the short interest is that high. i really think a lot of investors panicked when the company guided down for the first time in two years. usually thernot just one roach. so for them to come out today and say, you know, actually 2012 should be a good year, people will give tiffany's the benefit of the doubt. at least early in the year. the rubber meets the road when we get closer to q4. >> raur ra, i want to ask you a kors-related question. i know you don't cover the company specifically. when you see a jump in same store sales of 36% do you think within your coverage universe you see names like a coach suffer? are they taking share from any of the stocks you cover? >> well, they don't overlap so much with coach. our checks on coach are very strong. i do follow the off price retailers. ross and tjx. i am seeing a lot of michael kors really everywhere in retail. so i think that brand has just
expanded distribution enormously. once again, we'll see if they can laugh that in 2012. >> we're out of time, laura. what is your top pick of the moment? >> i really like williams sonoma which got beaten up after a disappointing holiday report. if they're seeing acceleration out of the holidays which we bet they are i think that's a stock that could perform well over the next few months. >> laura, excellent to see you. treasury prices extending their declines yesterday as the 30-year jumped it tos highest level since september. this after two fed officials pointed out that the economic outlook showed less need for further monetary easing. so is the bull run in bonds over for good? pimco's tony crescenzi will join us. don't forget, today is the day bernanke plays professor. stay with us. they have names like idle time books
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family very publicly, rushing to hire 11 super large tankers, each of which carry 2 million tons of crude in what the newspaper describes as a wall of oil now steaming across to u.s.-based oil refineries over the next 40 days. saudi arabia clearly has one aim. to bring down oil prices and gas prices in america. joining us now on the cnbc newsline is paul sankey, an oil analyst at deutsche bank. paul, this is a very public move by the royal family in saudi arabia. can it do its job? can it bring prices down? >> well, it's very reminiscent, actually, of the move that was made back in 2008. if you remember the saudi king made an announcement that he felt that oil prices were too high. that they were damaging global economic growth. and that action would be taken to bring down oil prices. in the event, that move actually panicked the market. and we got to 150 in a rush. then, of course, rolled over. this time around i think, as you
said, the sheer quantity of oil that's being talked about here and the potential for weaker demand because oil prices are already so high may make this a more -- a more likely to succeed move. >> come back to the prices and the levels in a moment. but do you think it's more than just global growth this time around? you know, foreign countries know very well that the run-up to a presidential election is very critical. saudi knows that. israel knows that. is this more about drill, drill, drill or frac, frac, frac, an attempting to defuse that issue in advance of the presidential election and therefore the possibility that there could be greater production within america? >> no. i toedon't think so. i think they're generally worried about the height of prices and the potential for damage to the global economy. i'm sitting here calling you from abu dabhi. i'm not 200 kilometers from iran. i think that's obviously been a geopolitical boost to the price
that you could argue wasn't based on fundamentals. i think what's been interesting is up to now the saudis have basically been silent on the subject of the oil price right up to these heights that we've reached. and that's the most silent we've ever had -- most silence we've ever had from saudi arabia given how high prices are. this action, i think, is doubly encouraging to the market from the point of view of bringing down prices. firstly, because of the physical quantity of oil they're making available. secondly because it underlines that saudi arabia has spare capacity. those are the two issues. one, that we had such a high price with demand still growing. secondly, an open question of the spare capacity. we need all the oil we can get. u.s. production growth isn't going to change that, change the overall tightness of the brent market in my view. >> paul, i'm wondering, given the amount of oil that is expected to come here to the united states, are you surprised oil prices haven't dropped even more? what do you think the target would be? would it be to take out the iran
premium out of the oil market? so what would that be? another 10 tl$10 or so? >> we think iran is worth about 15 bucks, actually. i don't think that premium is going to go away even with more physical supply. i think the question is whether or not we can bring down the u.s. refining price of oil by adding supply to the u.s. market bring down gasoline prices. as i said, i think the real issue here is taking some of the risk premium associated with spare capacity away. i think that if people believe the saudis have plenty of spare capacity, let's say 1 million, 1.5 million barrels to date to spare and see demand beginning to weaken, the oil price could come back by those sort of levels, by the $10, $15 type dollar a barrel. our forecast for this year's average prices is $115 brent. we are looking for about a $10 fall in the price. >> i would imagine we would then see a commensurate fall in the price of gasoline. the last time i talked to you,
paul, you said president obama tapping the spr was essentially a fore gone conclusion. does this save the president from having to go there, so to speak? >> well, i mean, the problem with tapping the spr it's it's a one bullet gun. it takes a year to reload it. i think it means he's got, you know, a little bit of breathing space here in terms of when he plays that card to avoid the gun analogy too much. but when he decides that he wants to use that, it would be much more likely to be in peak driving season than right now, you know, in march when things aren't at their peak from a demand substantiate point in ta >> thank you for joining us. let's turn it back to china. growth fears weighing on emerging markets here. so should you be more selective when investing in emerging markets? could pair trades be a safer way to get exposure. time to trade the globe. tim seymour, founder of emerging money.com and managing partner
at triogem. see him every night on fast. i want to go straight into the pairs trade. i think these are interesting pairs. i would you to be able to really walk through. i wanted to start off with a copper producer since we are seeing a selloff pretty much across the board. walk us through this pair trade. you're going long or buying free port mac moran or going short and selling southern copper. how does this hedge the trade? >> before jumping right in, just say this. correlations have come down so dramatically from their peak in august at 80% to around 20% now. that's why pair trading works. that's why stock picking works. let's talk about these trades. em has been highly correlated to the rest of the world. i love free port scx. long sell southern copper scco. a valuation argument. on a range, six-month range between these two stocks, relationship freeport has been oversold. buy at the bottom of the relationship with a valuation discount. i also think it's a fair company. next pair trade, in russia.
you want to be maybe country neutral. maybe even em neutral. buy vmp. sell mtb. mobi people are looking for these inefficiencies, mel. we're stock pickers. this is twha we look for. we look for opportunities where we can play on fundamentals but also have some of your downside hedged and find great opportunities to get the dispersion. >> the other pair trade as a gold miner, buy gold fields. sell harmony. if you buy one copper miner and sell another aren't the concerns, for instance, concerns about china slowing, don't they hit all the miners across the board? how are you hedging if you're exposed to two miners on a long and short side. >> this morning's comments by bhp about china hit steel miners, iron ore, coal. i think the gold miners are getting hurt by something different, global strength. dollar strength.
gold as an asset class is getting hurt. the metal is down. miners have underperformed. again, buy the miners and buy them relative to each other. buy gfi. production profile improving. harmony has got bigger issues on a range trade. gfi relative to its own historical six month or nine month trend, a great place to buy it. relative to harmony your downside protected on the gold side, macro, but again you're buying a superior miner. >> good to see you. get more global trades every tuesday right here on "squawk on the street." of course, every night on fast money at 5:00. jefferies out with earnings this morning beating on both the top and bottom lines. what's the read-through for the other big banks? we'll break down the numbers, next. an investment opportunity you didn't see before. fidelity's next generation ipad app lets you see what's trending around the world, as well as what over a million fidelity customers are trading throughout the day. and advanced charting lets you customize your views and set up your own comparisons.
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a little over an hour into trading. 7:33 on the west coast. 10:33 on wall street. commodities from glencore agreed to handle vitera for $6.2 billion. they'll sell the majority to agrium. nike, starbucks and young brands among stocks hitting new all-time high. bank of america today's biggest gainer in the dow.
up more than 3% now. >> financials do well. it's a broad-based fall that we've had led by the energy stocks. coal in particular. look at peabody. down 5%. materials lower. only financials that are showing green. goldman's also doing well on the news about the job cuts. let's just check the breadth of the move. indeed, market levels of course after last week's big surge, s&p still trading around 1400. there we go. thank you very much. 1401. dow 13,145. just slightly lower as you can see. still down 92 on the dow. there you see the breadth of the move we've had so far today. 3 to 1 decliners to advancers. the nasdaq, there you can see it's again about 3 to 1. very interesting market at the moment. let's go to chicago and check in with the cme and bring in lincoln ellis who's managing director of the lin group. thank you for joining us. this is fascinating, the moves
that we've had over the last five or six sessions now, lincoln. >> yeah. it's a very interesting move. really it was two weeks ago on a tuesday that we had the last drop here. you're really wondering if we've churned kind of twice here. once at the 1370 level. you get a little turnover. a little increase in market participation. and now, again here, just north of 1400. it'll be interesting to see as we move into earnings season if this margin compression, if the energy price move has really started to bite into corporate margins. >> yeah. what is your view of oil and of the energy sector in general at the moment? >> look, i think the person you had on just two spots ago is spot on. you really have a $10 to $15 premium in both brent and wti. it is going to eat into margins both at the corporate level and at the retail level. consumers continue to feel that pinch. and that really is what is holding this market multiple
expansion back. >> but we've had a great run, haven't we, lincoln? we've had a great run. we've had a great expansion of those. >> yeah. and we think that markets probably fairly priced. it gives you pause to think where would the market or where could the market go for the balance of the year? i actually think the market finishes the year between 1375 and 1400 right here. so it looks like a lot of back and forth between now and then. >> what you're describing is nine months of net no gains. in other words, we could have quite a -- >> we could have a lot more volatility. given the price of volatility we've seen in the market over the course of the last six weeks it suggests that probably you will see more rather than less if you're the contrarian that we are. >> lincoln, good to talk to you. thank you for joining us there live from the cme in chicago. >> let's just shift gears a little bit now this tuesday morning. jefferies is out with earnings. what is the read through at this stage? cnbc's capital markets editor
gary kaminsky joins us on the news line for more. >> simon, good morning. i don't know necessarily we'll have a read through to the other banks. it's a fascinating story because there's a lot of lessons for viewers to think about in relation to this. i want to go back to november 3rd and november 4th to start. if you remember, i'm sure melissa remembers as well, this was sort of the pinnacle of the panic associated by some of the research that was put out by an analyst related to some of the issues there. really what did the company do that night? in fact, melissa probably recalls i broke into fast money that night. we talked about the fact that the company had decided to go with full transparency. they decided to collapse the hedge portfolio. in fact, they went so far as to actually put out numbers on some of the sovereign debt that was being raised in questions. that was really at the time something unique. i was -- i vividly recall. i was in the pierre hotel.
i went down the hall. phoned into the show. we talked about the fact if you go back to those date, simon, it was in fact legal insider buying sending a signal to those that wanted to see was the company backing up their own credibility. and the answer was absolutely yes. >> gary, hang on. is that really what saved it here? i appreciate that they moved very fast on what egan jones was saying. wasn't it more about the ecb and beginning to flood liquidity there? >> they got rid of their positions. they raised capital, gayry. >> absolutely not. it had nothing to do with the ecb. what the company decided to do in that november 3rd, november 4th period was deal with the allegatio allegations directly at hand. they collapsed their hedged portfolio. they decided to address the issues head on. let me finish what i was saying, simon. which was if you went back that night, you saw that the company bought back 5 million shares during that period.
lucatia, a 10% holder came out and bought 1 million shares at 11.84. two of the directors each bought stock at the same time. that is what we call legal insider buying. that's why you pay attention to those that know what they know as opposed to those that are speculating. the ecb had nothing to do with whether or not jefferies committed to their shareholder base that this is, in fact, what the facts were. >> i'm sorry. i accept, gary, everything you say is correct. but if i look at the chart we have with the two green dots on it as to when those events were, if i look at the recovery in the stock price, it is not immediately after that. it has much more shorting to do with that huge rally that you had in risk assets. >> simon, you have to understand the -- simon, you have to understand the specific securities. yes, in fact, the overall market is up in the same period. at that time there was a disconnect between short selling rumors and reality.
i want to talk about the company. it was a very significant quarter here. they had some very big investment banking wins. i want to point out three major deals that they led. they were involved with the kkr acquisition of sampson oil and gas. very significant energy deal. they were involved in the purchase united health care of xl which was a very significant health care deal. in addition, lionsgate and summit. the company's banking franchise continued to perform extremely well given, again, all this outside noise. it is important to remember there is a difference between opportunity with rumors and rumors many times that do become fact. in this case, you have to look back. you had an opportunity. you could applaud what this company did. it was a significant milestone. i do also want to point out, not confirm, not confirm, but a rumor in the marketplace that melissa's buddy was, in fact, a major buyer of the securities, both the equity and the fixed
income at this time in jeffries. that being carl ikahn. >> i will ask carl myself, gary. >> at drinks tonight. >> next week, actually. just kidding. gary, always good to hear from you. gary kaminsky, capital markets editor. more on jefferies beating on the earnings front on the top and bottom line. david trone, always good to see you. in terms of the read through, everybody wants to do a read through on jefferies. we did see much stronger than expected trading along with investment banking. if you're going to connect the dots, which banks could see the greatest benefit here? sf >> you know, the fic numbers were known to be good. they were 38% better than we thought. you have to keep in mind, jefferies runs a cash business. you can't map it exactly to
goldman. without any other data points, yeah, i think expectations today are incrementally higher on goldman because fic is such a big part of their business. then on the equities side, you know, equities trading was about 10% better than we were forecasting. so that would bode well for more like a morgan stanley. >> you've got an outperform rating. you see further to go. part of that is the simple tump we're seeing in the overall economy. do you see this stock has more upside from where we are right now compared to other stocks in your coverage universe? >> obviously when you're coming from a single digit level, i agree with gary. my clients all thought it was mf global which, of course, it was nothing like it. i could speak for an hour to tell you why they were two different companies in two timp different situations. a lot of this bounce -- a lot of my stocks, particularly the dodgier, riskier names are up a lot. nobody's doubled in value from that point of the ltro, okay? so this is definitely a company that convinced people that, you know, it's back on solid footing. you know, from here i think the
easy money has been had. i think there's probably another, you know, 15% or so. that's because this is a smaller company that does have expansion opportunities that the bigger guys don't really have because they are everywhere. i think it's more of a good kind of a longer term story now because the easy money has been mad. >> you do mention the ltro. that huge injection that came from the ecb. that, of course, changed sentiment and risk appetite in the first quarter. is that -- i think this is what you're driving at. is that a one off event, therefore? >> i think the one off event is, i was getting -- you know, i'm the only one with a buy on the stock. you know, when we were in november, people were saying, dave, is this mf global? you know, the market is very smart over long terms -- over long term periods but can be very unknowledgeable sometimes. you know, if it looks like a duck and quacks like a duck it's got to be mf global. i think there had to be an education process. i think the stock doubling says that. plus what you're talking about which is the risk assets got better.
>> i want to ask you about bank of america. yesterday certainly we saw a roller coaster ride for the stock on those rumors that were then batted down by the company itself about a secondary share offering. but some people say where there's smoke, there's fire. there was an investor willingness to believe that perhaps they needed to do a capital raise. david, in your view do you see any sort of need at all, even at the margins, for this company to raise more capital? >> the big issue for b of a is the putbacks. putbacks and moerrtgage losses that have already happened. they're going to get redistributed through legal process. the economy getting better isn't going to help that. if bank of america wants to take these as they come over the next two or three years they will not have to raise capital. if they do a big kitchen sink and do literally a $20 billion charge to kitchen sink this, at that point if they did it in a lump sum charge, they would have to raise capital. >> what's your feeling on kitchen sink or over time? >> i don't think they'll kitchen sink because it's bad legal
strategy. it's saying here's a pot of gold. come get it. come sue me. i think also, too, the market and guys like me are going to say, let's say it's $20 billion. is $20 billion really enough? maybe it should be $40 billion. there will still be skepticism out there. i don't think it would work. >> thank you for your time. appreciate it. we've got to take a break. shares of michael kors. a big turnaround. trading down now over 1%. still to come, kindle sales dwindling. this on the back of the ipad's 3 million sales in just one weekend. so why aren't consumers connecting with amazon's kindle? is the tablet trade killing the e-reader market? we'll talk amazon after the break. ♪ oh! [ baby crying ] ♪ what started as a whisper ♪
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another big deal this morning. amazon to buy kia robotics. an interesting move on innovation and automation. let's bring in now to discuss exactly where we are with amazon brian cooley. editor at large with cnet.com. the second biggest acquisition since they bought zappos.com. a good move in your view? >> am son is all about efficiency, simon. that's really what this is all about here. this is a fulfillment robotics technology platform they think will drive further cost down and increase precision of what is already perhaps one of the two or three best, well oiled customer satisfaction machines out there. >> in the meantime, can they attract customers like other
companies can? i mean, we've gotten news, of course, today they're now for the groupon style business that they're attempting to get off the ground, they're actually th $10 gift vouchers this morning -- >> yeah, for 5 bucks. >> 5 bucks, which is obviously not a lot of money. if you sell $1 million, it only costs $5 million as a promotion, but still, there's a surge or desperate need to get people to better connect to the ecosystem. >> i think that's where the kindle fire is a key example of what they're trying to do, put out a device that emblemizes in tangible form this array of thing amazon offers, which isn't as tightly visible to the consumer as the apple ecosystem because apple's been building it piece by piece deliberately for a long time. people can sit back and say, okay, i get what apple does, for the most part. amazon has a lot of great services and great ratings on them, but they're a little less connected in the consumers' mind. shopping on one side, deals on the other, instant video or downloadable video. they've got two ways of doing that. it's a little messier.
they need to focus, and the device is how they want to do that. >> i mean, there is no ecosystem, brian. that's the problem. it seems like they're trying to -- >> not on the device front, yeah. they have the tablet and the reader. the reader's a noninteractive device, so i've got put that aside. >> even online, there doesn't seem to be a real cohesive strategy. you have all these other sites within amazon where you have separate shopping carts. i mean, this company on all of these different fronts, its main parts of its business don't seem to be really bringing the consumer in and keeping them within that family. when i'm on zappos, it's a different shopping cart than when i'm on amazon. >> and amazon wants it that way because they have two different cultures. bestos has been asked about that and says, no, we won't put that together. they have two cultures, one is high-touch and almost fansible customer service and the other is ruthless efficiency. what amazon does a good job of, though, is that they are exceptionally out front and have been for a long time in really smart prediction and
recommendation. that's a tricky area to get right. it either goes really well or really badly. you suggest to me i should buy helly kitty bath slippers and i have no interest in that. so, it's hit or miss and they hit it pretty well. >> really? >> you should give them a try. >> they're quite comfy. >> is it fair to frame the comparison in a way that kindle versus the ipad? that's not a fair comparison, is it? >> it is not, but this is interesting. the customer question, the user question i get most often about tablets from people who come to me and ask, should i get a fire or an ipad? they're different in size, operating system, apps availability, price, of course, and where you get them and how you get support. one has real-world support. one only has online support. and yet, customers put them together because i think they do perceive those two companies as an offer of how i will live with the device. >> and they are not mutually exclusive. you can have both. and i read here that respondents for the kindle are in a survey buying 2.4 books a month.
the satisfaction that they express, 78% either extremely or very satisfied. that, in their terms, in bezos' terms is moving towards results, is it not? >> yes, it is, but also, in the same research, 31% of kindle fire owners say they expect to spend more in amazon in the future versus 19% of non-fire users, a pretty decent difference there as well. that's of course where amazon needs to make its next move. as with the kindle, can they drive this fire color tablet down to a whole other lower price tier, which apple won't do? they, interestingly now, nooeth need even more space between their price and the ipad price, even though there is already quite a bit, but the tablet is not as much of a must-have in our culture as the smartphone. as a result, that favors the luxury player, which is apple. >> do try the slippers, brian. nice to see you. >> pink or yellow, what do you think? >> got to go pink, brian. i mean, they're hello kitty. >> i can do that.
i'm a big enough man. >> if you're going to go hello kitty, you've got to go all the way, simon. why not? >> brian cooney joining us there from cnet.com. thank you. straight ahead this morning, we're talking window dressing and the chance for it to shoot equities higher in the first quarter on the back of the big 2012 rally so far. but first, rick santelli, what are you working on for the next big hour of "squawk on the street"? >> and it is a big, big, big hour! we're going to be talking about, well, interest rates and fed speak. cause and effect. then we're going to touch on the topic of securities lock-up. that's the fed ownership of a boat load of securities. and maybe my least favorite topic of the day, the saudis and oil. our wonderful benefactors overseas, great favors they want to do us with regard to middle east oil. tune in, top of the hour. ♪ t. but... home security systems can be really expensive. so to save money, we actually just adopted a rescue panther.
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window dressing, it is an end of the quarter phenomenon time and time again. kayla tausche thinks it might be especially bad this time around. why that? >> it was only yesterday i started talking to people who were saying window dressing, curtains, blinds, shutters, shades, whatever you want to call it this time around, because few people actually expected this rally in equities. and if you look at fund flows, they didn't actually start
moving net into equities until the end of february, so there were a lot of people who missed out on this rally. if you take a look at where the indices are right now, obviously, nasdaq being led by apple, but most funds already held apple. so you can't look at, you know, where we see these reports at the end of the quarter, where we see these apple holdings. here are the other ones that people are going to be holding -- sears. that's the big one, which is interesting. we look at it intraday all the time, but it's up 152% year to date. that's a huge short coverage. so many people were short last year, and the surprise is that it's performed as well as it has. that's a huge short cover there. bank of america up 77%. obviously, a huge financial rally, double its ten-day and 100-day moving average just yesterday. we expect that volume to continue going into the end of the quarter. netflix always the hot-and-cold trade, up 65%. and priceline.com up 48%. a lot of these fund managers are going to their brokers and saying i want to be able to hold this stock at the end of the
quarter so that i can say maybe i've been holding it the whole quarter. you only have to have it one day out of the quarter, not 89 days. >> if we are to believe there's going to be an extreme amount of window dressing, blinds, valiances, shears, drapes, all of that, tieback curtains, if that's going to happen, should we see a flow continuing? this theoretically should help financials, for instance. a lot of funds have been underinvested overall. that sustained the rally we've already seen. so perhaps to provide another leg of fuel. >> right. and even seeing bank of america hit $10 yesterday, that was a key mark, and you could probably see it hit that again before the end of the quarter. i was talking to howarder silver and he said investors who were not in large-cap u.s. equities who took higher risks, risks being treasuries -- treasuries down 4% this quarter -- they are not rewarded this quarter. they'll be lube looking to move assets, even commodities. the safe haven plays still up but less than the overall
market. equities are still going to be the story. you'll see a few names, a few pockets with a human amount of volume flowing in, but across the board we may see some shape shifting as far as these portfolios go. i would be especially careful on the debt side. everyone remembers what happened with mf global. that was a case of debt window dressing. that's not always easy to find because debt really is a little bit more of anopaque assets. so, they were selling off a lot of their position before the end of the quarter, buying back at the beginning of the quarter again so that they were net long those positions, but it wasn't really something you could tell from the filings. debt's going to be tricky. equity is where we'll see a lot of the money flowing. >> kayla tausche, thank you for the report. meantime, third hour of "squawk on the street" starts right now. welcome to hour three of "squawk on the street." here's what's happening so far. >> we're giving the country a very clear and legitimate choice
of two futures, one where we want to get us back to prosperity and growth, stop picking winners and losers in the tax code, grow the economy and get our spending and debt under control so we can avoid a debt crisis. >> let's have a conversation where we start with some corporate tax reform, making sure that the wealthiest pay their fair share, make sure that oil company executives are paying their fair share. let's go there first, rather than consistently asking seniors to be the first to do it. >> february housing starts just about as expected, 698,000 seasonally adjusted annualized units. >> my take is that there is really nothing new here, other than the fact that, hey, shocker, this is what happens when an economy slows. >> producer on our show actually put in a call to bhp and said that essentially the forecast that we're given this morning were the same as before, that in the past they have said that they will see china demand grow slow from more than 10% to 7% to 8% on average.
watching shares like caterpil r caterpillar, just coming out saying that global sales, meaning three months ending in february, were up 21%. there you have it, the opening bells here on wall street. >> i definitely think the market can sell at 15 times $100 or $1,500. so, i still think we have higher highs ahead. >> good morning. markets are lower today on signals that china's economy may be slowing. take a look at the indices where we stand now. we paired our losses here, the dow down 0.5%. 71 points is the loss. on the s&p 500, we're at 1403, down by 0.5% as well. on the nasdaq, we're seeing apple shares weigh on the nasdaq, down 1% and microsoft is down 1%, so the composite is down by 19 points. 3058 is the level. oil is sliding on china concerns. west texas and brent falling more than 2 bucks a barrel today. retail, some of the biggest winners today. tiffany, for instance, the best performing stock on the s&p after reporting quarterly
results. urban outfitters, j krcpenney a in the green. the final hour of "squawk on the street." let's get to our roadmap. a blast from the past stock that investors can't seem to agree on, adobe systems ending with disappointing quarterly results, but the stock is getting positive remarks and some upgrades. we will talk to the company's cfo to see exactly what is going on. then, solar execs meeting in the shadow of solyndra, quite literally. can this struggling industry make a comeback? we're live in silicon valley. plus, paul ryan and the house budget committee out with their 2013 budget. we'll have the first reaction from the white house with the director of the national economic council, gene sterling. also ahead, we'll take a look at some of the priciest pads in the windy city and see how the illinois real estate market is faring heading into the spring selling season. all that and a lot more in the final hour of "squawk on the street." we start this hour with "squawk on the beat," voting under way in illinois as mitt
romney faces another must-win primary for his campaign. so, who will come out on top? john harwood is live in chicago with a preview and a special look at the president's own campaign headquarters. john. >> reporter: melissa, rick santorum is hoping this first day of spring in illinois is when he can finally break through against mitt romney in a big midwestern state. fell short in michigan, fell short in the state of ohio. and mitt romney, on the other hand, is hoping another victory here would solidify his grip on the nomination, and he'd march ahead and get the delegates he needs. but while all that's going on, at barack obama's headquarters here in illinois, there are 300 people who are preparing a general election campaign already. they're organized by states. they're doing research. they're pushing video out to mobile devices. they are delighted to have more time to prepare their campaign. they say they're ready, whichever, santorum or romney, comes out of the republican process, but they're confident that it's likely to be mitt romney and that he's being weakened by this extended
primary process. >> it's making him a weaker general election candidate, you know. he's the most extreme candidate on immigration right now. he's the most extreme candidate on women's health right now. if that's what makes him a stronger candidate, then you know, we're ready. we're putting all of the tools in place to run a re-election campaign to run a general election campaign and we're trod flip the switch, no matter who the nominee is, whether it's romney or santorum. quite frankly, their policies would have the same impact on the economy, the same impact on the country in terms of women's health and the progress that we've made. >> reporter: question's going to be when do republicans get to flip the switch on building a general election organization, raising money for turnout and mobilization? it is possible, if mitt romney can break through here and follow that with victories in some of the april states, wisconsin and then the primary competition moves to the northeast, that this thing could begin sooner. until that happens, though, there's going to continue to be this talk of brokered convention and a protracted process.
>> but john, there's no prct, surely that santorum or gingrich are going to leave the race any time soon. that's certainly not what gingrich has been saying. >> reporter: that's right, but they don't have to leave the race for the thing to be over. if mitt romney begins to become so dominant in these primaries that he's getting the overwhelming proportion of delegates, it doesn't really matter if they stay in. newt gingrich already has been marginalized in this race. his capacity to do damage to mitt romney is quite minimal right now. rick santorum, on the other hand, has shown, as he showed last week, and he'll have another chance this weekend in louisiana, that he can really take mitt romney on when he can consolidate conservative votes. the question is, can he really punch through? we're going to find that out in illinois today. >> all right, john, see you a little later. john harr fwrood chicago. let's head to chicago and rick santelli with the latest on the santelli exchange. good morning, rick. >> hi, simon! well, you know, yesterday and many days we have fed speak, and much of it's attributed to
moving treasury rates higher, as much of the media reported yesterday. but let's keep this cause-effect pretty clear. on the 13th was a fed meeting and we went from the teens to the 30s and 10s, we went from the 0s and the 15s to close to 350 and 30s. why? because if there's a constant barrage of, we'll help you with this, we'll buy this, we'll manage this, of course the market's going to wait to see what goodies it can get, but there wasn't a lot of goodies in that statement. things change. but keep also the high level of rate. wednesday, the 15th, long before much of this recent fed speak, we'd carved out the top of the range and we've been defined by it ever since. next, lock-up. we all know what lock-up in stocks is. that's when shares can't be traded. the federal reserve owns boatloads of agency securities, bargain securities, treasury securities. and you think they're going to be selling them in the open marketplace any time soon? no, no, no!
they're going to hold them and let them run off. well, what happens when you have a big swath of a tradeable grouping of financial assets like securities and you control part? well, it makes it easier to manage. but at some point, there's going to come a tipping point with all this issuance and the fact that so many central banks are on the same highway, and that is what the market is most nervous about. last but not least, you know, on the telegraph today, a lot of saudi stuff, and today, saudi arabia said it would work, in quotations, individually, and with other petroleum-rich gulf states to return prices to fair levels. fair levels, okay? now, i understand saudi arabia's kind of a friend, even though they're part of a cartel. look up that definition. in the end, just because the timeline of us getting up to speed on extra barrels is a much longer process than the saudis, who are up to speed, i am tired of hurry-up defense, whether it's t.a.r.p., whether it's stimulus or whether it's going to the saudis hat in hand.
we need to have a hurry-up offense because the world will go on after november and let's think supply, u.s. supply, in the big picture. back to you. >> rick santelli, thanks so much for that. meantime, markets trading lower across the board. gary fairs with wells fargo investors says investors are less fearful. good to have you on the program. >> good morning, melissa. >> i want to start with the main, the crux of your argument that investors are less fearful. you say look at the gold market, that typically there's an inverse correlation. gold stocks do better when people were worried and stocks go down and vice versa. what we've been seeing the past couple of days, today stocks are down along with gold. what does this tell you? >> well, i don't think you can look at the day-to-day activity and necessarily see the big picture, but the big picture to us, we think, is still pretty positive right now, that gold prices have sort of moderated from their high levels late last year where a lot of people were fearful. and the stock market's come up
off its lows, so we think those are encouraging trends that suggest the economy's doing better and people are feeling better about it. >> yeah, at the same time, whenever we get a data point that even points to slowing growth, like the ones we got out of china overnight, investors take their money and run. is there still just this embedded -- you say investors are less fearful, less relative, but there seems to be this fear that there is that possibility out there. >> oh, sure. i mean, we haven't stopped all the turmoil in the world. there's still a lot of uncertainty. problems exist still in europe. we're watching very closely what's happening in asia, in china. i think a lot of investors are still a little bit concerned about these, but i don't think the level of concern is as high as it was last year and we don't think it's going to necessarily get a lot worse from here. we think it's going to start to get better as we see more signs of stabilization in our economy and we get more liquidity coming out of the global central banks. we think that's very positive. >> so, gary, can i push you to make some clear calls? where do you think gold will go from here? >> well, we're not bearish on
gold. >> right. >> we do think gold can still go higher if we do have some unexpected events, but we're just not seeing the type of demand for gold that we saw last year, nor are we seeing it in the treasury market where we had a strong demand for government debt when people were very fearful. so, we're seeing some corrections, i think, in these markets, and we wouldn't expect a big decline in gold. >> just how many are you down on that, then? are you saying in the absence of an unexpected effect, gold will fall? >> no. we're more concerned about the weakness in silver right now than we are gold. we still think that gold has some upside potential with the central banks creating a lot of liquidity right now, but we're not seeing the type of safe haven demand fear that we saw last year. so, it's more of a back-and-forth gold market right now. >> what about the bond market, those big moves we've seen on yields, the relatively sharp sell-off? okay, it's not a plunge, but a
relatively sharp sell-off last week coming into this. what do you think about bonds? are they dangerous to be in at the moment? >> well, simon, we don't think bonds are dangerous. we just see a little less demand right now because people, investors are feeling a little more confident. we do think that over the course of the year that we will see bond yields trend a little bit higher as the global economy gets a little bit stronger, but we don't think it's a dangerous place to be. we just think investors need to understand that there are some downside risks this year in bonds, where last year we were seeing a lot of up side. >> gary, investors are less fearful, but there's still a lot of money on the sidelines, an estimated $10 trillion of individual investor money that's not yet returned to u.s. equities. if somebody's sitting on the sidelines right now, gary, what advice do you give them? do you say go into the markets? and if so, where? >> we like the market under term. obviously, we've had a good first quarter here. market's a little above our year-end target, which is 1325, 1375 on the s&p 500. we could trade down into that
range and out of that range a couple of times this year, but we do think next year will be higher. and one of the things we like is the cyclical stocks object weakness. >> all right. gary, thanks so much for joining us. gary thayer from wells fargo adviso advisors. up next on the program, a stock you may not have thought about for a while. adobe has been up more than 20% so far this year. maybe the rally is over. big changes at adobe. we're going to dig down into that business with the cfo, straight ahead on "squawk on the street." our machines help identify early stages of cancer and it's something that we're extremely proud of. you see someone who is saved because of this technology, o if i did have an opportunity to meet a cancer survivor, i'm sure i could take something positive away from that. [ jocelyn ] my name is jocelyn, and i'm a cancer survivor. [ mimi ] i had cancer. i have no evidence of disease now. [ erica ] i would love to meet
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okay, let's talk software. the maker of flash, acrobat and photo-shop, adobe systems coming through with a 21% decline in profits today on weaker-than-expected revenue. the stock, as you can see, has taken a bit of a hit. the company, in many people's eyes, are an old tech company. it's had a steady climb recently, up about 6% year to date, but of course, the market has done far better than that. joining us in a cnbc first is mark garrett, the cfo of adobe systems. good morning to you, sir. thank you very much for joining us. >> good morning and thank you
for having me. >> i guess for you this is very much a quarter that's about transition. it's about taking your customers to the release of the software that will be in the cloud, that they will pay a subscription for, rather than a one-off payment, and the lead-up to that and the reservations they might have about buying now when there's a new product coming. >> yeah. if you don't mind, let me give the viewers a little context. there's an explosion of digital content going on in the world as more and more businesses move online and more and more content is pushed online. and adobe is in a unique position to capitalize on this huge opportunity. we've organized our investments in our business into two major segments, digital media and digital marketing. you're discussing the digital media side of the business, which is made up of products such as photo-shop and illustrator and indesign and includes our acrobat offering. this is a $3 billion annual revenue business for us, and we
are transforming the way content is created, distributed and monetized. >> sure. >> to answer your question, we are transforming that business by offering with our new release late in the second quarter of this year a subscription business. so, we will continue to have the perpetual product offering, but we'll also offer a subscription business so people can subscribe to the cloud and get constant updates to the product at a very low price. >> forgive me for interrupting you, but you obviously as a management have to do what you have to do to get to the next platform to be in the cloud. a shareholder doesn't necessarily have to hold the stock through that process, and there is inevitably a concern about the degree to which profitability will be hit because people are not going to pay up front for the service anymore. it's a subscription over a longer period of time. and what some analysts have suggested, you know, might take a longer time to migrate, might be a little bit of a tougher
journey than you as the cfo might be expecting. what would you say to those concerns and those people? >> well, we're going to continue to offer the perpetual product and the subscription product. so, we don't view a lot of risk in transition with this subscription offering. we also believe that with the subscription product, we will attract a lot of new users to the offering that have never used our product before. to your point where some people may be paying us less up front, that's offset by attracting a lot of new users. and we also get to combat piracy, where people are pirating the software today. there will be a lot of benefit to subscribing and joining the membership in the cloud, and we believe that we'll attract more revenue by virtue of combating piracy also. so, we don't view any transition risk in this process, actually. >> unfortunately, though, mark, a lot of wall street analysts do. you've got a number of downgrades from the street. pacific crest is one of them, and they highlight the uncertainties surrounding this transition. they call 2012 a transition
year. some analysts are saying you've got a revenue miss, you're sticking by your full-year 2012 forecast of growth of 4% to 6%, which puts the pressure on the out quarters of the year. and pacific crest continues and says that "at this point, we are skeptical that growth can return to double digits in 2013." what do you tell investors out there in the analyst community who are saying, you know what, we just don't believe it and we don't believe we'll see the growth for another couple of years? >> so, i believe we had a very good, solid first quarter. our revenue was in our guidance range, our earnings were right at the consensus. what we did see is that people got very excited about our upcoming release of creative suite that will happen in the second quarter of this year, late in the second quarter. and by virtue of their excitement, they did delay some purchasing, but that bodes well for the second quarter and the back half of the year as the release comes out. so, we're very confident in our ability to hit our numbers this year with a whole new product
line coming out with cs at the back half of the quarter. >> and it's a big quarter, of course, to keep the guidance where it is for the full year. one last question for you, mark, before you go. with the passing of steve jobs at apple, are you talking to tim cook about the adoption of flash on apple products? i mean, is there any possibility of movement there? >> you know, you'd really have to ask tim about that. we have a great relationship with apple now. we compete in some areas and we partner in some areas, and we will continue to support flash, of course, but we'll also have a lot of initiatives around html-5 that will benefit the apple product line as well. >> so, are you saying that it is possible that apple could use flash on mobile devices? >> again, that's a question you'd have to ask apple. right now, we're committed to flash on nonmobile devices, and we're committed to html-5 on mobile devices. >> good to meet you, sir. good luck with the transition. mark garrett there, cfo of adobe
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♪ after the tabakle of solyndra, it's hard to believe anyone would invest in the solar industry, but believe it or not, there are more than a few investors who think the sun is still shining. the puns continue. jane wells i'm sure has many more puns, live in the silicon valley with more. >> reporter: hi, melissa. the show is opening in an hour, but let's look at how solar companies are doing. not very well. ja solar reported a larger than expected loss. and we'll get news in an hour whether the commerce department will slap tariffs on chinese
makers to punish them. claims china isn't playing fair is cited as one reason american companies like solyndra, which is literally just up the road, couldn't compete and went belly up, but solar remains a challenge. they say the supply chains continuing overcapacity at any level, so why would any venture capitalist put money in this business? >> it's actually been a great year for solar. >> what? he says the plummeting panel prices made it a great year for installers because it was so cheap to buy solar. installations in the u.s. more than doubled. her firm invested in companies like tesla is investing in technologies which the chinese can't do yet. >> concentrated pv is on a tear. we have a company that sold out of its pv panels that are made in a completely different way and a very patent-protected way. they're sold out through the
third quarter of this year. just, they can't make enough. >> another sunny spot, financing. clean power finance funded by kleiner perkins and google ventures connects investors with installers who want to offer financing to customers. the company's head count has quadrupled in a year. >> they put these installers, over 1,500 of them, directly into contact with investors like google, who want to be able to deploy capital into solar. we look at it compared to other consumer investments and consumer asset classes and we see it as the risk of a prime mortgage, but it pays like a credit card. >> reporter: later on "power lunch," how u.s. solar companies are trying to avoid being the next solyndra. and guys, what we're hearing a lot here is expect some clean tech ipos this year and expect some more bankruptcies. back to you. >> wow. all right, jane, thank you very much for that. up next on the program, the white house's reaction to paul ryan's 2013 budget proposal this
down 6 and the nasdaq down 17 at 3061. caterpillar says global sales are up 27% for the three months ending in february. machine sales are up. glencore looks to acquire viterra for $6.2 billion. canada is the third largest wheat exporter. and crude falls more than 1%, pressured by the stronger dollar as well as word that saudi arabia will ship a bunch of crude to the u.s. crude trading down about 1.5%, pairing some of its losses. >> two hours into trade, let's bring in bob pisani for more on how the markets are looking. >> ian ashby from bhp billiton must be scratching his head right now thinking, my heavens, what did i do, this global earthquake i set off because i'm at a conference in perth, australia, with the iron ore executives and i said, by the way, imports into china will go into single digits this year, something everybody in that
conference knew about, yet somehow is picked up on the press to indicate china is slowing down. but we knew about all of these numbers. and i'll tell you a simple statistic -- chinese iron ore imports grew an average of 21% a year from 2000 to 2010. eventually, as you know, simon, the law of large numbers take over. you can't keep growing 24% a year. eventually, you have all the iron ore in the world. the law of large numbers takes over. now, the imports slowed to 11% in 2011 and now they're talking about single digits. this is not a big surprise, but you would have thought the rest of the world didn't understand this. look at the effect it's having on some of the iron ore companies, including bhp billiton, which is having a tough day. not an impossible day. but rio, vale, and even machinery companies like joy global are to the down side here. my point is, this is not that much of a surprise. let me just show you, the same thing with caterpillar. melissa just mentioned, machinery sales globally up 29%, 39% in north america. this seems to be a big shock to people who are in caterpillar. yet, if you look at their
comments and projections, their numbers last year were unbelievably off the charts. same thing, unsustainably high. so, here's machinery sales and this is the key division to look at. february 2012, okay, we've already got the number, up 21%. but in february of 2011, machinery sales were up 59%! these numbers were huge all throughout last year, and now, just now starting to decelerate. this is not a terrible shock if you know what's going on in the company. can't have 60% growth on the year, and everybody seems to understand that. i also want to point out something going on in china with the chinese oil companies today, because china, the chinese government came out this morning and dramatically or notably raised prices on gasoline as well as disc late in china. not good news for the chinese consumers. it would be good news theoretically for the chinese oil companies, but they haven't been able to make money because the government is regulating the price of gasoline. they're losing a ton of money and will continue to lose unless prices go up more.
a little bit of bad news for the chinese consumers. and hopefully, these chinese oil companies will start being able to make some money. >> there's a second price hike in six weeks. >> that's right. >> that was particularly jarring there. bob pisani, thanks so much. now let's head to rick santelli in chicago. rick. >> well, thanks, melissa lee. i have a guest today, matthew scharl, a farmer and has a fund called genesis. welcome, matt. it's not many times i talk to futures traders. and of course, you're in the nonfinancials now, so dealing in livestock and grains. but you also farm. how many acres and where's your farm located? >> my farm's located in southwest michigan. it's about 200 acres. >> now, 200 acres. you told me you've been farming about seven years. you started out with 60 acres. what were you paying for an acre back six, seven years ago? and i want the audience to realize, china made everything change in your area of michigan. they used to grow apples, china competition, now you're back into beans and corn. what's the price difference from
then versus today? >> i paid between $1,800 and $2,000 for my initial property and recently it's closer to $3,000 and $3,500 and a local near me paid close to $5,000 and he's a bigger farmer. >> we are definitely starting to see a payoff. there's only so much great farmland and michigan may not be as great for corn as. iowa or parts of illinois, but it's still good. input costs. how much do you pay and how did it work out? >> i buy my corn seed as early as possible, as soon as i'm harvesting. i try to get the potash and the nitrogen bought fairly quickly, and that way, i've got the money to do it and not have to worry about it. then i try to hedge next year's crop based on what i've paid for the input costs. >> you were telling me off camera that it's odd because corn really prices to its components in the form of inputs, and you're not sure you agree with that. can you elaborate? >> yeah. potash kind of does its own
thing, but nitrogen's the interesting thing because it's derived from natural gas, which right now is a third of what it was six or seven years ago, but nitrogen, the price of it's stayed the same. so i think the inputs follow the price of corn more than it does the actual inputs of what it takes to derive the product. >> which is kind of unique to commodities. i mean, if we were talking about crude oil now, they'd say, oh, my god, speculation in nitrogen or potash, because based on your comments, it makes sense. you think the price is loftier than the corn would dictate, but that's just human nature. if you can't grow corn without the input and looking back at a 20-year chart, we were $5 for years and now we're above that routinely. so that's a driving force. >> yes. >> can you give me a final comment about what should be the price of corn? it's been going down a bit, around $6.50. i'm hearing world supplies are weak. why is it selling off lately? >> i think partially because of the dollar and everyone's pretty happy with the weather that's happening, but i think that's the biggest concern. it's going to be easy this year to get it in, but i think
drought's the biggest concern for this year. >> i got you. always be afraid of ideal growing conditions, especially if you're trading corn in the futures markets. back to you. >> thank you very much, rick santelli live there in chicago. meanwhile, in washington, the house gop unveiling its budget blueprint today. the plans might not make law, but they are ambitious and they're headline-grabbing. planning cuts and simplification of taxes spending and overhauling the medicare health program. this is how 42-year-old architect paul ryan sought to introduce it on "squawk box" this morning. >> we think we should stop picking winners and losers through the tax code in washington by clearing out these loopholes, you dramatically broaden the tax base so that you can lower tax rates without sacrificing revenue, and i would argue, you'll trigger faster economic growth. >> well, now to respond to that, gene sperling joins us, director of the national economic council and assistant to the president for economic policy. thank you very much, sir, for
joining us on the program. >> thank you. >> there must be elements. as a reasonable man, there must be elements of this plan to which you are attracted. >> you know, i think there's no question, we as a country need to take comprehensive efforts to bring down our deficit and our debt. that's what the president tried to do in his plan, and i think that most of the bipartisan plans out there have called for that type of balance, where you asked for everybody to share in the sacrifice, and you particularly ask that those who are most well off, most fortunate, that they will pay a little more so that you're just not asking for the pain of deficit reduction to come on seniors, people with disabled members in their family, education, energy, important priorities. but you know, unfortunately, i wish i could be more generous to this plan, but it is really a completely unbalanced plan. i mean, this is a plan where they do not ask for a single
penny of revenue to contribute to the deficit reduction, not one. in fact, they still offer to give over $1 trillion of tax relief to the most well off. at the very same time, they are calling for just very significant cuts in things that are important to growth and education, basic research, and their savings on medicare are not well thought out, they're not sensible ways to try to reduce the costs of medicare through ensuring we're focusing more on quality than quantity of services. it is essentially a plan to come up with an annualized voucher that's overall goal and design is to increasingly shift costs to seniors in a way that tends to increase the amount our economy and our country spends on health care and not reduce it. >> isn't it a simple fact of economics that you are going to have to radically overhaul social security, medicare and medicaid? that is really the only way, in broad terms, that we are going to sort out the budget problem
that we have. we're talking about trillions of dollars. and actually, you may -- >> that may be your opinion, but it's just not where the facts are. you do need to do tough things. you absolutely need to. the president's put forward a budget that brings our debt down as a percentage of our economy, brings the deficit to lower than 3% of gdp, puts us on a very strong path, and it does make very tough choices. it asks for over $360 billion in medicare and medicaid savings. it asks for defense and discretionary savings. it also asks for revenues to be part of that picture. as you've seen in the bowles/simpson plan, even with prime minister cameron in the uk, a plan that simply asks for the spending cuts to fall deeply on medicare and medicaid is not a plan to control entitlements. it is to lower those costs as a way of affording increased tax cuts for the well off. >> we need somewhere between $4 trillion and $8 trillion that we need to find in this economy.
you're not going to find that with the main proposal that seems to be to increase the tax that 1,000 or 2,000 hedge fund managers in connecticut pay on their capital gains at the moment. there is also a distortion -- >> that's absolutely -- [ everyone talking at once ] >> no, you're just not correctly describing our plan. the president calls for a balanced package, which does call for significant revenues on those who are most well off as part of a plan of overall shared sacrifice. i do not believe that you have to radically overhaul medicare and social security. you do need to make significant changes. this president has done that. he's extended the life of the medicare trust fund by eight years and is proposing to do more, and we agree that you need to have a grand bargain, a grand compromise. but i'll tell you where you're just fundamentally not correct right now. the huge part of our deficit problem right now is the fact that in the last decade, we gave
significant tax cuts and never paid for them. had we not done that, had we not created that revenue problem through having two rounds of bush tax cuts that were not paid for, our deficit would be headed to 2% of gdp, 1% of gdp. so, revenues and entitlement savings are both part of the problem. >> but to be -- >> and all we're asking for that you have a balanced approach and not try to have these extremely harsh cuts in medicaid -- >> but you're not, sir -- >> that hurt people who have disabilities, people who are -- >> hang on a minute. but what you are saying -- >> -- on long-term care just so that you can do it without using any revenues. >> with respect -- >> we are part of significant savings as part of a balanced package. we are not for putting deep burdens on those who are most vulnerable in our economy and the middle class simply so you can abide by chairman ryan's view that you should not add one penny of revenue to a deficit reduction page nor ask for one penny more from the most well off in our society.
that is not a plan of shared sacrifice, that's not consistent with our values, that's not consistent with how we as a country take on great challenges. >> thank you, mr. sperling. >> thank you. >> thank you for joining us. >> thank you. coming up next, the cherry blossoms are in bloom, and so is the spring selling system. but could rising interest rates derail a housing rally? find out after this.
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coming up on "the halftime report," who is feeling the heat as china slows? we have the trade. plus, ipad momentum. sterningy lifts its apple price target to one of the highest on the street. we're talking to the analyst behind that call. and tiffany's shining forecast. should you buy into today's rally on that stock? all that and more at "the halftime report" at the top of the hour. now back to melissa and "squawk on the street." >> we look forward to it, michelle. it's been a rough road for housing, but interest rates have been a glimmer of hope. as the rates rise, how about that impact the market? diana olick is in washington with a "spring realty check." diana? >> reporter: melissa, last month we were talking about mortgage rates sitting at record lows, but good news for the overall economy is not so great news for those low rates, because as investors crawl out of the treasury bunkers, treasury yields are rising and mortgage
rates which track the ten-year treasury are rising accordingly. take a look at where we've gone in the last week. rates have gone 18 basis points, so the bank rate overnight last night of 4.05%. now, that may not seem like a lot, but for every 50 basis point rise in mortgage rates, you lose 3% to 6% of housing affordability, according to some analysts. so, how high will mortgage rates go? paul miller at fbr says mortgage rates were too high, anyway, relative to the ten-year, so he doesn't think we'll see that much of that parallel shift. he says there's a lot of cushion in there. but a couple things to remember about today's unique housing market, and that is that investors made up 23% of all existing home buyers in january. that's according to the national association of realtors, and they largely used cash. but 31% of all sales in january were all cash, which means noninvestors are also turning to cash. and 35% of the market is distressed sales, foreclosures and short sales, which are on the very low end of the market. and again, the majority bought with cash. so, not so much leaning on those
mortgage rates. now, we talked to a lot of analysts about this today about what this impact is going to be of these mortgage rates. interesting one, though, is that frank of freddie mac said 4% is definitely that emotional turning point going from the record lows, going above that, but he said some folks that are sitting on the fence might see those mortgage rates going higher and say, wait a minute, i don't want to lose out on the 60-year lows, and it might prompt them to jump off the fence and buy a house. so, hopefully, always a bright side. melissa and simon? >> okay. >> thank you very much, diana. >> interesting times, diana. thank you very much. we're going to stick with that in the next part of the program as illinois heads to the polls today. we're going to hedge the windy city to get a peek at some of the area's poshest primary properties. we're back with some property after the break. here's a chance to create jobs in america.
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♪ here's the money that i owe you ♪ in light of today's republican primary in illinois, we are taking a look at the high-end residential real estate market in chicago as part of our "luxury listings" series. chris furrer is with sotheby's international realty and joins us now. chris, you certainly brought a fass nacinating list of propert. i want to start with 11 east walton street.
the trick is that this is a conversion, part hotel, part condos. it's going on right now, so it's unfinished, and it will be delivered white box, which means you have to have a little creativity. >> that's right, melissa. this is a $6.35 million single-floor, 6,500 square feet. it's on the 56th floor of this amazing building. this is really the it building right now. it's under contract, actually, to close soon. it was purchased by an investors less than a year ago, and it's an indicator that the market's coming back. >> the second property is lincoln park, and that, in case people aren't familiar with chicago, one of the most expansive areas of chicago. it's a huge house, 7,200 square feet, and it's asking what, $4.1 million? >> yeah. this is a $4.1 million single-family home in lincoln park, which is a neighborhood just to the north of the hustle and bustle. it's right down the street from the lincoln park zoo and easy access to the linc. >> and if you want views, like for instance, of lake michigan,
then 209 eastlake shore drive could be your new home. $7.25 million. >> yeah. this is really an extraordinary home. it's arguably the blue chip location of chicago. it's on the bend of lakeshore drive, so that means you've got an unparallel view of the north shore. >> and sales overall, chris, i mean, you said that the demand is out there. have they been picking up? have you noticed the impact of the seasonal spring selling season in terms of demand? are you going out more often, showing people around these ritzy properties? >> we've seen a tremendous increase, and it happened back around thanksgiving. so, i've been tracking it pretty close. thanksgiving until today, we're up about 200% year over year. >> and who are buying -- who's buying these homes? is it u.s. -- are they investors? do the people intend to live in these residences? are they from overseas? >> these are actually owner-occupants, and i've seen a lot of uncharacteristic buys. chicago's a conservative town,
so people are moving up from $1 million properties to $5, $6, $7 million properties, but they're mostly owner-occupants. >> well, we'll find out. we'll follow up with you. chris feurer coming to us from chicago. >> thank you. you might have noticed some of the alerts at the bottom of the screen. "consumer reports" is publishing the reports of a ipad heat probe later today. there have been complaints on apple blogs about the heat generated from the new ipad after 30 minutes of use, some people saying it's coming from the lower left-hand quadrant of the ipad when you hold it upright in the portrait position. but apparently, we are going to get the word from "consumer reports" as to whether or not this is something to be concerned about. they are investigating. >> in fairness, my ipad 2 generates a lot of heat sometimes, oddly, from all parts of the back, depending which way you're using it. >> maybe this is a more pronounced problem. >> maybe. >> but we'll await the word from "consumer reports" later on. don't forget to tweet us. fed chairman ben bernanke giving
lectures at george washington university within the hour. we want to know if you were one of professor bernanke's students, what would you do to impress him? our handle is @cnbc squawkst. we'll read some responses after the break. stay with us. [ tom ] we invented the turbine business right here in schenectady. without the stuff that we make here, you wouldn't be able to walk in your house and flip on your lights. [ brad ] at ge we build turbines that power the world. they go into power plants which take some form of energy, harness it, and turn it into more efficient electricity. [ ron ] when i was a kid i wanted to work with my hands, that was my thing. i really enjoy building turbines. it's nice to know that what you're building is gonna do something for the world. when people think of ge, they typically don't think about beer. a lot of people may not realize that the power needed to keep their budweiser cold and even to make their beer comes from turbines made right here. wait, so you guys make the beer? no, we make the power that makes the beer. so without you there'd be no bud? that's right. well, we like you. [ laughter ] ♪
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time now for "squawk on the tweet." we asked you because fed chairman ben bernanke is going back to school today, so we asked, what would you do to impress professor bernanke? so, let's get to our tweets here. jeff tweets "to impress professor bernanke, i would blow my nose with $100 bill to show i hold his view of the greenback's value." >> that's a bit extreme. >> very extreme. give me the $100 bill. >> like the student protests of the '60s all over again. blow your nose on a bill. >> so cheeky, as you would say. dan tweets "answer every question like a fed chairman, dry, evasive and meticulously prepared." and this tweet "bail him out." very witty. >> we've got a statement coming through in response to the ipad alleged heat problem, courtesy of all things digital. the new ipad delivers a stunning display of chips supported for
4g lte, plus four hours of battery life, all while operating well within our thermal specifications. if customers have any concerns, says a spokesperson, contact apple care. >> i guess they're saying -- >> a chilly response. >> a chilly response to the heat problems, says simon. i guess they're saying it operates within our thermal specifications. they're essentially saying, yeah, the thing heats up, but it's all right because that's what we all thought. still, "consumer reports," again, just to reiterate, they're investigating the matter. they're going to issue what they find later on today. >> that, presumably, could be market-moving. >> it might be. i mean, if this is truly a problem or found to be too hot, then there might have to be recalls. >> obviously recalls. >> but that's aye down the road there. >> what's on "fast money" tonight? >> we have a big show. we're talking about lion's gate, a string of 52-week highs on the back of the demand for "the hunger games," the newest movie coming out on friday. we have the vice chairman of lions gate, michael burns, to talk about the ticket sales. we h